Is SEC Posse Going After the 13D/G Gang?

By Dennis K. Berman

There is nothing more annoying than a passive aggressive family member or colleague. Ever so subtly, it begins to dawn on you that their gentle wheedling or whining might serve some bigger purpose.

So it goes with a group of investors who have been buying up stakes in companies and marking their interest as “passive.” With a “who? me?” incredulousness, they increase their stake, typically saying it represents only a standard investment and that they have little intention of publicly advocating for strategic or board changes. In SEC terms, this means filing a 13G form, instead of the activist special, the 13D – as in “Carl Icahn just 13Ded me.”

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Of course, there is a Kabuki quality to these 13G filings, as they very often lead to very active shareholder roles: Such as when Eddie Lampert’s hedge fund, ESL, negotiated a takeover of Sears Holdings Ltd. while still a “passive” 13G filer.

These technical distinctions will be increasingly important, as Deal Journal has been hearing repeatedly that the SEC is looking to crack down on some of these ever-active but purportedly passive investors. If so, that could mean even more upheaval around proxy contests and boardroom control, and potentially more activity from the likes of Carl Icahn, Steve Cohen, Dan Loeb and the rest of The 13D/G Gang.

Whether the SEC’s guidance will take place publicly or is only being rendered behind the scenes, pay attention to the next wave of 13G and 13D filings to see whether changes come to this arcane but important arena.

Comments (5 of 6)

A perfect example is Northwest Airlines buying into MIDWE
AIR and then strangely having them pull out of areas that Northwest currently serves.
Now MIDWEST is up for grabs and NORTHWEST says they are totally passive.
V E R Y SUSPICIOUS>

4:32 pm October 27, 2007

dr. marc wrote :

13(d)enforcement and the regs are far behind the current times; the use of derivatives, hedges, shorts and assorted ways to temporarily buy votes while divesting economic interest allow for signifcant game-playing with no 13(d) visibility required. The SEC needs to update the regs to account for the modern era in slice-and-dice investment techniques.

12:39 pm October 27, 2007

j d wrote :

the sec has apparently not placed any priority on the enforcement of the 13d rules and its apathy has allowed multiple abuses in addition to what is noted in the article. the purpose of the rule was for the public to be aware of any purchases within 10 days of more than 5% and the 2% within a 180 day period.

the prices also were to be disclosed. there has now bwwn a blur of hedge funds ,mutual funds affiliates as well as the control and they use the institutional rules to only make annual filings[example mstr a few years back that was cited to sec withour response] and an allocation of shares between the entities without any transparency. the individual can buy his position first,let the hedge and the mutual buy thereafter thus in effect front running.there is no disclosure on sales of the positions as well as they claim an exemption and file after the end of the year and dont show which affilate sold at what price nor to comply with 16d rules

4:10 pm October 25, 2007

oh really wrote :

James,

If that's the case, what does Rule 13d-1(e)(1)(i) mean:

"a person that has reported that it is the beneficial owner of more than five percent of a class of equity securities in a statement on Schedule 13G pursuant to paragraph (b) or (c) of this section, or is required to report the acquisition but has not yet filed the schedule, shall immediately become subject to Rule 13d-1(a) and Rule 13d-2(a) and shall file a statement on Schedule 13D within 10 days if, and shall remain subject to those requirements for so long as, the person: (i) Has acquired or holds the securities with a purpose or effect of changing or influencing control of the issuer, or in connection with or as a participant in any transaction having that purpose or effect, including any transaction subject to Rule 13d-3(b); and (ii) Is at that time the beneficial owner of more than five percent of a class of equity securities described in Rule 13d-1(i)."

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